As you are all aware now the SEC filed a lawsuit against Goldman Sachs on Friday. Basically the lawsuit alleges that Goldman Sachs sold a derivative that contained mortgage backed products. The problem was that Goldman did not disclose to investors that the hedge fund that picked the mortgages was also betting against the derivative. The allegations are nothing to sneeze at. However, given the size and scope of Goldman Sachs, this lawsuit sets up the appearance of a new major banking crisis
It is the timing of this “new crisis” that some are starting to question. The timing could not be better for the Democrats as they seek to pass sweeping financial regulations and the target, Goldman Sachs, is also something to question.
New York Times: WASHINGTON — With the Senate scheduled to begin debate on a financial overhaul bill this week, the fraud suit against the Wall Street titan Goldman Sachs has emboldened Democrats to ratchet up pressure on Republicans who oppose the Obama administration’s proposal.
In a sign of the Democrats’ increasing confidence that they have the better of the argument in an election year defined by voter anger at big banks and bailouts, White House officials said Sunday that President Obamawould take his campaign for a regulatory overhaul on the road in coming weeks.
That campaign will resemble his push that helped the health care bill past its final hurdles.
Mr. Obama in effect has made the measure’s fate a highly personal showdown with the Senate Republican leader,Mitch McConnell of Kentucky. Over the last 15 months, Mr. McConnell has sought to defeat each of the Democratic president’s domestic priorities in turn.
We all know that this administration is crawling with ties to Goldman Sachs. Does anyone doubt that even if found guilty, Goldman Sachs will not pay a heavy price? Democrats are more than willing to play the populist card against banks in order to get their legislation passed. Some Republicans are at least calling out the possibility of a rouse:
The Hill: [...] Sen. Judd Gregg (R-N.H.), a member of the Senate Banking Committee, warned members on the other side of the aisle from using the charges for political purposes, saying that it's foolish to trump up the allegations that have not yet been tried in court.
"It's really disingenuous for some people to pursue regulatory reform based off this one instance," he said on MSNBC. "This is a single event, we don't even know what the outcome will be." […]
"We should not legislate based on anecdotal events," Gregg said. "This is a big piece of legislation, we shouldn't overreact."
Hopefully all Republicans will remain suspect of the Goldman issue and go over the Democrat’s bill with a fine toothcomb. Paging Paul Ryan!
Via: Memeorandum
Via: The New York Times
Via: The Hill